THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

HOWARD KURTZ, HOST: We're in Los Angeles this morning, but we'll begin with a Washington drama that became an all-out media obsession, the self-inflicted crisis that has now led to a downgrade in the U.S. credit rating.

Are the pundits right in declaring President Obama the biggest loser and the Tea Party Republicans the clear winners? Have journalists really grappled with the magnitude of these budget cuts and the economic impact we saw in the stock market meltdown?

Here in California, we pay a visit to "The Wrap" and talk to Sharon Waxman about the challenge of covering Hollywood without getting too close to the studios and the stars.

Plus, author Ned Zeman on how he went just plain crazy and had to investigate what happened when he lost his memory.

I'm Howard Kurtz, and this is RELIABLE SOURCES.

It was a made-for-television drama with the full faith and credit of the United States on the line. At the heart of the debt crisis craziness was a serious debate about the role of government. But while the last-minute agreement between President Obama and the Republicans will slash $2.4 trillion from federal spending, once the deal was sealed much of the focus shifted to a narrative that political reporters are all too familiar with: who won and who lost.

(BEGIN VIDEO CLIP)

DIANE SAWYER, ABC NEWS: It is official. The compromise bill on the debt ceiling and lowering spending is now the law of the land.

NORAH O'DONNELL, CBS NEWS: And everyone in Washington got bruised over this fight, and the president did, too.

JONATHAN ALTER, MSNBC POLITICAL ANALYST: Both the president and John Boehner are in the loser categories here. Folks out there are saying to hell with all these guys.

BILL O'REILLY, FOX NEWS: So let's review. The president sets up a financial commission, then ignores it. The president puts forth his budget, and no one, not even members of his own party, votes for it. Would you have confidence in a guy like that? LAWRENCE O'DONNELL, MSNBC: After brilliantly making the Republicans look ridiculous at every stage of the negotiations, after slowly but surely educating the public about the importance of raising the debt ceiling, and after turning voter sentiment against the Republicans, in the end the president blinked.

(END VIDEO CLIP)

KURTZ: So how are news organizations faring in chasing this fast-moving story and unraveling the complicated compromise that kept the country out of default?

Joining us now here in Los Angeles, Dennis Prager, the syndicated radio host; Joan Walsh, editor-at-large at Salon.com; and in Washington, Terence Smith, former media correspondent for "The PBS NewsHour."

Joan Walsh, the commentary on the left has been that Obama got rolled, he capitulated, he abandoned his principles. You have called his stance appalling and you said that the Democratic Party has been dishonest about its core values.

Have you taken a lot of heat from your liberal friends over this?

JOAN WALSH, EDITOR-AT-LARGE, SALON.COM: Not very much. I think a lot of people feel the same way.

Look, President Obama has a very strong base. I don't speak for his base. I always make this clear.

However, he did sell out core Democratic principles. And when you have a situation, Howie, where one party says compromise is a mortal sin and the other party says compromise is the highest good, you've got a real problem.

And the party that says compromise is the highest good gets rolled. There's no way around it. And they did.

KURTZ: Dennis Prager, commentators have also savaged the Tea Party Republicans. They have been intransigent, unrealistic.

DENNIS PRAGER, RADIO TALK SHOW HOST: Terrorists, jihadists.

KURTZ: Who cares if we default?

Have you found that to be unfair?

PRAGER: Well, not only is it unfair, they are the ones, in my opinion, who have stood up for America, because we're becoming like Greece, we're becoming like Italy, we're becoming like Portugal and so on. And so I think they have stood up for America.

KURTZ: What about the intransigence rap?

PRAGER: Yes, the intransigence rap always goes to the Republicans. I'll give you one example here of what troubles me. When Jared Loughner shot Congresswoman Giffords, the entire media was saturated with, look at the way the Republicans talk. Now that the Democrats and the entire left-wing blogosphere and commentariat are saying jihadist, the vice president called the Tea Party terrorists.

KURTZ: I want to come back to that. That's someone in dispute, but we will touch on that.

Let me go to Terry Smith and ask this question -- give us a little altitude here. Has the coverage captured the dysfunction in Washington and the anger out there, as opposed to chronicling the typical ups and downs of beltway politics?

TERENCE SMITH, FMR. PBS MEDIA CORRESPONDENT: I really think it did both, Howie. I think the coverage was exhaustive and exhausting, frankly.

And there was the familiar tendency to take an economic story and turn it into a political story, and to assign blame, who is up, who's down, et cetera. I have to say, you're doing some of that yourself right now in this segment. But it's a big story.

I would say the media failed to anticipate the consequences, the S&P downgrade, the market swoon, all the problems that are still coming. So this story is still going on, and I really argue that it's too soon to assign blame. And maybe that's a fruitless exercise anyway.

KURTZ: Media always very quick to assign blame. We'll get to the economic impact in our next segment.

But, Joan, Dennis already referred to some of the language being used. "New York Times" columnist Joe Nocera wrote the following: "Much of the country has watched in horror as the Tea Party Republicans have waged jihad on the American people."

Don't liberals usually complain about inflammatory language in politics?

WALSH: Well, Joe Nocera actually wrote a second column and sort of apologized.

KURTZ: He did apologize yesterday.

WALSH: That's one thing.

KURTZ: So did you have to apologize? Is that kind of language -- I mean, you've talked about Tea Party crazies.

WALSH: Crazy, a little bit. I've said it was a hostage-taking. I believe it was a hostage-taking. And do you know who agrees with me? Mitch McConnell.

Mitch McConnell joked about it. Some people in our party wanted to shoot the hostage, but we got some ransom. So I really think that once Mitch McConnell thinks that's a funny thing to say, holding the economy hostage, which they did, it's fine for the left to say it. And I don't believe that the vice president said it. It sounds like someone else said it and he may have acknowledged.

PRAGER: Well, the vice president never denied that he said it. He said that people shouldn't say it. That was what he reacted to the Politico piece.

KURTZ: OK. Politico reported that Vice President Biden, in a closed-door meeting with Democrats, had referred to the Republican Tea Party types as terrorists.

PRAGER: Right.

KURTZ: Biden sort of denied it, but it wasn't an airtight denial.

Your point is that the media don't get very exercised when this kind of language is used by liberals?

PRAGER: Well, that's right. There was one Sarah Palin chart with a gun side on the Giffords' district as a vulnerable Democratic district in the election. And we were excoriated.

We Republicans were excoriated for causing shootings. But when the rhetoric is "Satan sandwich," it's satanic the bill, and Nancy Pelosi said there were Satan fries with the Satan sandwich, I mean --

KURTZ: A real Happy Meal.

PRAGER: Yes. Exactly.

(LAUGHTER)

SMITH: Howie, this was a manufactured crisis. So, in a sense, it was a political debate more than an economic debate. And it was pushed, let's face it, by a group of Tea Party freshmen in the House, largely, and pushed forward into a crisis situation right down to the deadline.

So I guess in this case it's really more understandable to treat it as a political story. But in it, the economic consequences get lost.

KURTZ: Well, let me play for you, Terry, part of a scorching commentary the other day by Keith Olbermann in which he talked about the role of journalists in this debt crisis.

(BEGIN VIDEO CLIP)

KEITH OLBERMANN, CURRENT TV: It will do no good to wait for the media to suddenly remember its origins as the free press, the watchdog of democracy envisioned by Jefferson. They are too busy trying to get exclusive details about exactly how the bank robbers emptied the public's pockets, to give a damn about telling anybody what they looked like or which way they went. (END VIDEO CLIP)

SMITH: Well, you know, I'd say Keith is striving a little hard himself there maybe to get somebody to watch Current TV. I don't know. But there's some truth to all of this, you know.

KURTZ: Sure, but Olbermann is making this indictment, saying that journalists are more interested in the sort of scoring the behind-the-scenes action than talking about the substance of what happened.

Which brings me to this question, Joan Walsh. We have $1 trillion in budget cuts now, another $1.5 trillion down the road, the super committee. I understand all hasn't been said, but there's been very little reporting, it seems to me, on the human impact of what these reductions are going to mean, and much more, did Obama lose the upper hand, who is going to capture the Independents?

Does that trouble you?

WALSH: Yes, it does. And I'm probably guilty of it, too.

I think what they did is very complicated. Part of why this was such an anti-Democratic thing to do is that it happened so quickly, it really wasn't part of the normal budget debate. And I don't think that the normal budget debate is a great debate either. A lot of Washington is dysfunctional.

But specifically to do it with this kind of deadline hanging over their heads, no one understands really what's in the bill, no one completely understands what the super committee is going to do. And that's troubling. And people will lose jobs, people will get hurt, and I can't really describe all of it for you.

PRAGER: Let me just ask you, does it trouble you that nobody knew what was in Obamacare? That was rushed far more than this was rushed.

KURTZ: Wasn't that debated for over a year?

PRAGER: No, it wasn't.

WALSH: It went through multiple committees.

PRAGER: Are you kidding? Nancy Pelosi said, "I don't know what's in the bill. We'll know it when it's passed." Those were her words. Nobody knows. We don't the extra taxes.

(CROSSTALK)

KURTZ: Media double standard, in your view?

PRAGER: Totally. And by the way, you asked about the human impact. I wish the media did a segment, or many segments, on the human impact of such debt.

That you'll never see. You'll see human impact of cutbacks, but not of the debt.

KURTZ: And finally --

SMITH: You know, Howie, just to wrap that point, that's the test going forward for news organizations now. Take a look at the consequence of what was done and cover the super committee. Don't drop it in favor of other faster-moving stories.

KURTZ: I think that's a great point. I also think there's now a belated focus on what the polls are showing us that people really care about, and that is the 14 million people in this country who don't have jobs. They were totally overshadowed by this debt debate. Understandable to some extent because of the histrionics and the deadline and the fact that we are facing a government default. But now the polls show -- whether the polls show it or not, that is an economic story, it seems to me, has gotten overshadowed.

Let me get a break in here.

When we come back, the stock market melts down in the wake of this beltway budget deal. The S&P downgrading federal debt.

Were the media too quick to declare this crisis over?

(COMMERCIAL BREAK)

KURTZ: It was an ugly day on Wall Street on Thursday. The stock market kept going down, down, down.

Here is a little bit of what it looked like on cable television.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: You have the S&P down by more than four percent, our biggest loss since 2009.

UNIDENTIFIED MALE: A rather panic-stricken sell-off continues. Look at that, 476.54 down, and going further down.

UNIDENTIFIED FEMALE: What a day. And you will see the headlines tomorrow. There's no positive way of spinning this. The Dow Jones industrials down 512 points.

UNIDENTIFIED FEMALE: And it is 4:00 on Wall Street. Do you know where your money is?

(END VIDEO CLIP)

KURTZ: I want to check where my money is. That montage was put together by MSNBC's "Rachel Maddow Show."

And Terry Smith, that happening, as well as the now S&P downgrade of federal debt, kind of reminds me that there's a real economic world out there. And I wonder whether the media, once the deal was made -- everybody went off on vacation -- were a little too quick to declare this crisis over.

SMITH: Well, it's obviously not over. And news organizations are still in a sort of crisis mode on this. They're watching the markets today, Sunday, Sunday night, as we roll over into Monday. And we'll see this.

There are obviously several shoes to drop here. And so, legitimately, it will be covered. And it is somewhat in a crisis mode.

At the same time, you have people arguing whether the S&P downgrade was reasonable or appropriate, or whether they even got the arithmetic right. So I think there's a lot of hard reporting to be done here. And it's clearly not over.

KURTZ: And among those doing the arguing, Dennis Prager, are White House officials who are sniping at the S&P, one of three credit rating agencies, which didn't do a great job during the subprime crisis, by the way. And you are had this extraordinary spectacle of top S&P executives going on two Sunday shows this morning, ABC's "This Week" and "Fox News Sunday," to defend the downgrade.

What do you make of the fact that it's become a political war?

PRAGER: Well, I don't know if it's become a political war yet, because I think a lot of Republicans and a lot of Democrats don't have a high regard for S&P. So I'm not sure there will be a political war on that.

But I just want to say one more time, we do have an indication of world markets. There is one world market that has opened, Israel, because they have Sunday as a work day. It's gone down five percent, the Israel stock market.

The issue is debt. The issue is unemployment is a human tragedy, but the economic tragedy causing all of this is debt.

It's the debt in Europe. It is the debt in the United States. And the media won't focus on that. They will focus on the human tragedy of unemployment and the human tragedy of cutbacks.

KURTZ: How could the media not focus on the fact that the stock market is tanking and that we now have this downgrade? I mean, it seems to me that forces journalists, even if they want to deal with the political ups and downs, to confront the damage that this self- inflicted crisis has caused.

WALSH: Well, there's a real debate over what the crisis is. And I don't think it's a debt crisis. I think it's a demand crisis that people are unemployed, people were over-leveraged, they were taking money out of their homes, they can't do that anymore.

Wages haven't risen. Wages have fallen while unemployment has risen. People can't buy. People can't restore the economy. And that's when Keynesians believe the government steps in and the government voids demand. And we did that, and we didn't do it adequately, and we're stuck with the ramifications of that.

KURTZ: You were writing in Salon about -- go ahead, Terry.

(CROSSTALK)

SMITH: I'm sorry, but Joan is exactly right there. There isn't a debt crisis. There's a debt problem.

There's a growth problem and a growth crisis, if you like. And that is the essence of it. This is, in essence, an ideological argument to some degree, but there are real people who are really being hurt here. So that makes a difference.

PRAGER: Yes, there are real people being -- I said that. There are real people being hurt.

KURTZ: Right. But you think the media --

PRAGER: But the reason for the downgrading and the reason for the stock market and the reason for Israel going down five percent is debt, not American unemployment.

KURTZ: Just briefly, why do you think the media, in your view, have not focused sufficiently on this enormous debt?

PRAGER: Because the media are left of center. That's --

KURTZ: How is it a left-right issue?

PRAGER: Well, it's clearly the right believes debt is the problem, and the left believes that we don't spend enough, is the problem. We don't tax enough and don't spend enough. It's as clear as day. That's my big thanks to this crisis -- clarity.

KURTZ: All right. You two can continue this outside.

Joan Walsh, Dennis Prager, thanks for joining us here in Los Angeles.

Terry Smith, thank you as well.

Coming up in this second part of this special edition from L.A., we take our cameras to the offices of "The Wrap" for a look at how Sharon Waxman's Web site covers Hollywood's incestuous culture.

The St. Petersburg Times' Eric Deggans stops by to talk about MSNBC's move to hire Al Sharpton and the network critics tour out here as well.

And "Vanity Fair" writer Ned Zeman on what it's like for journalists to literally go crazy.

(COMMERCIAL BREAK) KURTZ: We're here in CNN's Hollywood bureau. And you would think Hollywood was one of the most well-covered beats in the world. But two-and-a-half years ago, former newspaper reporter Sharon Waxman founded a Web site to scrutinize what's known here in L.A. as "The Industry."

TheWrap.com soon expanded its coverage to other forms of media and entertainment. But how does an upstart compete with the established giants?

We took our cameras to an editorial meeting at "The Wrap," where there was plenty of talk about television and movies, but also on a very big beltway issue.

(BEGIN VIDEOTAPE)

SHARON WAXMAN, FOUNDER, THEWRAP.COM: Let's just do a (INAUDIBLE) story, "Hollywood Reacts to the Debt Ceiling." It's the only (EXPLETIVE DELETED) out there right now. There is nothing happening.

UNIDENTIFIED FEMALE: We talked about this a little bit last week with kind of the graphics and the over the top. I mean, any time the cable news channels go wall to wall on it --

WAXMAN: One thing we can do, Jay (ph), why don't you watch -- why don't you scour Twitter for reactions to that in the media in entertainment, and could be also celebrity crowd on the debt ceiling.

UNIDENTIFIED MALE: Do we want the celebrity crowd? Is that going to --

WAXMAN: I definitely would love a little Twitter reactions the best you can, sure.

UNIDENTIFIED MALE: And I think it depends on who the celebrities are, too. We need to get more serious celebrities. But I like the second (INAUDIBLE) saying, how is this really going to affect Obama's re-election.

UNIDENTIFIED MALE: You're not going to necessarily have the Matt Damons and Robert De Niros going in and doing these rallies where -- because, really, you have a ton of movie star support and public support of him the last go-round. That seems to be more of the thing. I mean, Geffen is going to support the Democrat, and so is Barbra Streisand, even if -- I mean, we can ask that question.

WAXMAN: There's a different issue that is revealed by this whole episode, and that is a question of Obama's character. You may have loved him, loved him, loved him during the campaign. No candidate ever governs like he runs.

But he promised change, and he does control the White House and a house -- the house of Congress is his party. And he's governing like he has no power.

(END VIDEOTAPE) KURTZ: I later sat down with "The Wrap" founder, Sharon Waxman, to talk about her site's coverage of all kinds of media and entertainment issues, including the debt ceiling, and a Hollywood culture where access is everything.

(BEGIN VIDEOTAPE)

KURTZ: Sharon Waxman, welcome.

WAXMAN: Thank you.

KURTZ: So the story that has dominated the news in recent weeks has been the debt ceiling negotiations in Washington. Out here, you feel like you're a million miles away. The weather is nice, you've got the palm threes.

The other day you were talking about the debt ceiling for an entertainment Web site?

WAXMAN: Well, you know, we have to follow the news. And that's all anybody is talking about.

So, whatever global story or national story is happening, we're going to take the piece of it that impacts our core readership, which is the entertainment industry and the media business. So that's what we were doing, and seeing how that's impacting. If the debt ceiling deal didn't happen, how would it affect our businesses?

And then, plus, everybody knows that Hollywood is an establishment of liberals, and they are big, big funders of Democratic politicians. And so how might that impact their donations in the future, if they're angry at the president or the Democratic Party?

KURTZ: Hollywood is liberal. There's some breaking news for us at the top.

WAXMAN: Breaking news.

(LAUGHTER)

KURTZ: The television critics are out here this week for the industry presentations. Each network does a dog and pony show.

Does that produce a legitimate story?

WAXMAN: That sounded like -- that sounded a little bit like a slam, but OK. That is what it is.

KURTZ: Well, no, no. I mean, it's a perfectly good thing for critics to do, but are they really getting spoon fed by industry executives? You're not sure.

WAXMAN: No, no. I mean, I'm of two minds about it.

KURTZ: You only have time for one answer.

WAXMAN: I only have time for one answer?

There was a time when I first came out here that I was very surprised at this spectacle and found it a little bit (INAUDIBLE), and also an opportunity to sort of miss the big picture of what's really going on in television, because, of course, the agenda was set by the people who are putting on the show, which is the networks and the TV news establishment who want to promote their new shows and their new stars and their ratings and how well they're doing. But, at the same time, this is a pretty closed industry. And that is an event where you can stand up and ask any question you want.

So, I myself have used that forum. Sometimes I'm looked at for asking in the middle of the room a question that doesn't involve getting a six share on a Monday night, which is obscure to most television viewers.

KURTZ: So it gives you a shot at people who are hard to get on the phone.

WAXMAN: Yes, that's right. So the access there is really unusual in this industry. There is nothing like that, for example, for the movie side of the industry where you can go up to an executive and ask them a question like, for example, "Why do you make so many bad movies?"

KURTZ: Well, speaking of access, do you think that a lot of the organizations that you compete with here in Los Angeles are so worried about access because it's a relatively small but very important and very lucrative industry, that they pull their punches?

WAXMAN: Yes. I really think that has a lot to do with why we started "The Wrap," because it was my feeling that the traditional trade publications writing "The Hollywood Reporter" had long ago stopped doing the job of asking tough questions of the industry, and that were very complicit in their coverage. And you could see that.

KURTZ: And you're talking here about everyone from "L.A. Times" calendar section, to "Hollywood Reporter," to "Variety" to bloggers?

WAXMAN: I think most specifically -- the "L.A. Times," that's not so much what I was thinking of. And I have to sort of think harder about that, because they have done some hard-hitting coverage over the years, and they've got some really excellent reporters over there. I'm thinking more specifically about the trades that were in this very symbiotic relationship of advertising editorial. And as the business model for print, as you well know, collapsed, all of that just kind of became unsustainable, that whole cycle of basically giving editorial in exchange for advertising.

So "The Hollywood Reporter" of today is a completely different ownership, and they've actually stopped doing the daily. They now only do a weekly glossy. It's much more oriented toward a consumer audience. And we're not sure whether that's going to work yet.

KURTZ: But on this question of the symbiotic relationship, I mean, you, "The Wrap" has moved a little bit into print. You were showing me some of these magazines you put out for events.

(CROSSTALK)

KURTZ: So, in order to get Christina Hendricks and Julianna Margulies to pose for your cover, isn't it in the back of your mind or in some of your reporters' minds that if you're too mean toward their movies or their studios, that they may not be on your cover?

WAXMAN: Well, no. Not at all. Not at all.

I mean, that's the same -- if you establish a line of credibility at the beginning, then you will be respected as a news organization. That's always been my approach when I was at "The Washington Post," when I was at "The New York Times." We would write very hard-hitting stories sometimes, and also write very benign features that are just interesting to the reader at other times.

It's not always called for an aggressive stance or a watchdog sense in this industry. This is a very creative industry. There's many fascinating, interesting and talented people that you can shine a light on that are worthy of editorial coverage. That's what this magazine is about.

It's not a muckraking magazine, it's about looking at some of the interesting performers and writing and directing talents in the TV season. So, but that doesn't mean that we're not going to write a story that's critical of either the network that puts on "The Good Wife" that Julianna Margulies is in, or that's going to write -- or that may run a review that's critical of that same show. But because we play fair, because we don't have an agenda, I think we have a really good relationship with the industry that works so far.

KURTZ: Since there's such intensive coverage of Hollywood, when you started this Web site was it an uphill struggle? I mean, you got some money from Howard Schultz, the founder of Starbucks. I mean, why did he want to finance, some might say, another entertainment Web site?

WAXMAN: Actually, there was a really big gap in the marketplace for a professional, credible news organization that was geared to the digital age. So, at that time, as I described to you just before, traditional print was dying. There were a few blogs here and there that held people in its thrall for either being just very aggressive or just being loud and being very gossipy.

And there's a ton -- you're right in that the entertainment space in general is really, really saturated. So there's TMZ and there's EW and there's "Access Hollywood," and there's all of this. But we're not any one of those things. We're not a celebrity site. We really do cover the business of entertainment and media, and there really wasn't --

KURTZ: You don't do any gossip?

WAXMAN: There are many occasions when gossip intersects with real news. And of course we like to think we have a sense of humor and we'll cover gossip in some way, but it's not our obsessive focus. We believe that we serve a news function. And there was nothing like that that was serving that purpose when we started "The Wrap."

KURTZ: Since you live online, more or less, as you know as well as anyone, there's a huge debate about aggregation, borrowing things from other sites. You got into a debate on "Reliable Sources" with Michael Wolff.

WAXMAN: I did indeed.

KURTZ: His site was unfairly borrowing things from your site.

WAXMAN: They were.

KURTZ: Are you finding now that out it's in your interest to link to a lot of these other sites that might be considered rivals? And are you getting ripped off, in your view, by other sites?

WAXMAN: There is that competitive tension that exists. We have a policy of linking to and crediting other sites when they break news first, or when, certainly, if we're aggregating their news, which sometimes happens -- it doesn't happen a whole lot, but we do like to point to other stories that we think are interesting that we may not have originated.

I do draw the line though when there are sites that will not link to us or ever credit us. I recently actually made a decision that I'm just not going to -- I'll cite those sites, but I'm not going to link back to them, because I think it's a matter of professional courtesy. But that is our policy and we do do that.

KURTZ: Come back to my question about Howard Schultz and why the founder of Starbucks wanted to help finance "The Wrap." Do you have to all drink the coffee? I mean, what's involved there?

WAXMAN: We have a Starbucks downstairs and we drink an awful lot of Starbucks.

KURTZ: So it's no coincidence that this office is --

(CROSSTALK)

WAXMAN: No, it is a total coincidence, because we actually started "The Wrap" in my back guesthouse. So there was no -- it was all homemade coffee.

KURTZ: OK.

WAXMAN: but to be more precise, Howard Schultz actually didn't fund "The Wrap." It's a venture capital firm called Maveron of which he is the co-founder. And so he actually didn't make a decision to back "The Wrap." It was the partners in Maveron of which he is not one who decided to back "The Wrap" as a business venture because they liked the opportunity.

KURTZ: As a former reporter for "The New York Times" and "The Washington Post," you've reported from the Middle East, you've been based in Paris. Does it ever feel to you just a little bit self- indulgent to go to Cannes and Sundance and be writing about these overpaid movie stars?

WAXMAN: Are you kidding me? It's self-indulgent? I never work harder than when I'm at those festivals. It's not like a lot of fun, but hanging out.

KURTZ: So this is a business? You're not having a great time in Cannes?

WAXMAN: Well, it's not about that. I mean, for me, it's a total transformation of my life as a reporter, because I'm the CEO, so I'm responsible for the business of this company. I'm responsible to my investors. I'm responsible to a staff of 22 people.

I'm also a reporter. I'm also an editor. I'm also now doing print. I've never edited magazines before since I was in college, so that's a different scale.

KURTZ: Sharon Waxman, thanks for indulging us by letting us visit "The Wrap."

WAXMAN: Thanks for coming.

(END VIDEOTAPE)

KURTZ: Up next, MSNBC close to hiring Al Sharpton. St. Petersburg Times' Eric Deggans on the television critics tour in a moment.

(COMMERCIAL BREAK)

KURTZ: As the networks take their turns touting their programs to a gathering of the nation's TV critics not far from here, much of the buzz involves MSNBC, which is on the verge of giving a nightly program to a former presidential candidate who has been filling in for weeks.

(BEGIN VIDEO CLIP)

AL SHARPTON, MSNBC: A lot of people are saying President Obama caved to the Tea Party. But how can you deal with a group of economic hostage-takers? We'll debate that next.

(END VIDEO CLIP)

KURTZ: Joining us now to talk about this is Eric Deggans, media critic for the "St. Petersburg Times," who is out here for the critics tour in Beverly Hills.

And Eric Deggans, Al Sharpton about to -- on the verge of getting an MSNBC job. He would be the first African-American with a nightly show on cable news in years, and yet he's not a journalist. He's obviously a liberal activist and former candidate. ERIC DEGGANS, MEDIA CRITIC, "ST. PETERSBURG TIMES": Exactly. And I think that's something -- that's what worries some black journalists. You know?

We have been pushing hard to try to have diversity, particularly in cable news prime time. We don't have a person of color who is really hosting a show on any of the major cable news channels in prime time. And to have that one slot go to someone who is more of an activist and not a journalist --

KURTZ: Not a journalist by any stretch of the imagination.

DEGGANS: Exactly. And I also think it's a larger problem. I mean, when you see somebody like Eliot Spitzer even get a show, and then he has to cover the peccadilloes of a politician who's caught in a sexual scandal, all of a sudden there's a resonance there that you wouldn't necessarily have if you had someone with a straight journalism background in that job.

KURTZ: Sharpton was supposed to appear this week at the National Association of Black Journalists, of which you are a member, and he canceled because a couple of members of the organization had criticized the fact that he is about to get this MSNBC gig.

DEGGANS: Right.

KURTZ: What does that tell you about his attitude toward journalistic criticism?

DEGGANS: Well, you know, I wonder about that. I mean, you know, I'm on an Internet list server, and we were discussing it, and I guess he says he was reacting to that. But what we also saw was that there were news stories that talked about the connection between the group that he runs and the way it got money from Comcast, and the way it advocated for approval of Comcast taking over running NBC Universal.

So, did he cancel because people were having a discussion on a list server, or did he cancel because he didn't want to have to deal with that larger public controversy in a public setting?

KURTZ: Lesley Stahl, "60 Minutes," when she did a piece on Sharpton, says he told her that he had decided not to criticize President Obama on anything because that would aid people who wanted to destroy the president. Sharpton's spokeswoman denies that he said this, but this actually was a point that Cenk Uygur, who was on my program a couple of weeks ago, who was expected to get that 6:00 p.m. slot on MSNBC made.

How do you give this nightly platform to somebody who reportedly claims he is not going to criticize the president?

DEGGANS: Yes. Well, you know, that is something that's troubling.

You know, I don't -- what bothers me more though is that he has a history as an activist. And again, coming back to this idea that he is connected to an organization that has got money from NBC Universal to advocate for certain political issues, and then all of a sudden he's going to go on their air and be fair about some of these same issues.

I think that is the concern that people are worried about. And is he going to criticize Obama or not? I mean, you can look at somebody like Sean Hannity and say, is he going to criticize a Republican president? You know, we have these people in prime time who are pundits, and often they come from certain --

KURTZ: Well, they're entitled to their opinion. But just to have a policy, if that is indeed what he told Lesley Stahl.

DEGGANS: I just think it would be awful programming. And I doubt he'd even be able to stick with it.

KURTZ: Sure. I first covered Sharpton in 1987 when he represented a teenager named Tawana Brawley, who made what turned out to be false claims of a gang rape. He's never apologized for that, and that's bothered a lot of people. But Phil Griffin, the president of MSNBC, says he's now an elder statesman.

Let's switch to the CBS presentation. CBS News chairman Jeff Fager promoting his new anchor, Scott Pelley. He said about Katie Couric, who just of course gave up that job, "We did lose some viewers in recent years. Couric was frustrated," says Fager. "We realized she needed to spread her wings. It was not the right vehicle for her."

DEGGANS: Yes. You know, I talked to Jeff after that press conference, and he did sort of indicate that she felt limited by the hard news environment. And I think we all realize that once Jeff Fager kind of took over running CBS News, that they would be an even more a hard news organization and they would turn even more away from the kind of sort of features-orientated presentation that she shines in. So it kind of made sense that they would part company.

KURTZ: And, of course, Scott Pelley, much more of a hard news approach, and Fager trying to promote his new anchor of the "CBS Evening News."

Eric Deggans, thanks for stopping by in L.A. this morning.

And after the break, how do you write a book about a descent into madness when you've lost your memory? Ned Zeman joins me here in the studio, next.

(COMMERCIAL BREAK)

KURTZ: Ned Zeman was a top editor and writer for "Vanity Fair," spending his time trying to make celebrities sound fascinating. And then something happened. Zeman wound up hospitalized for what would be a long struggle with powerful drugs and therapy while he struggled to live a normal life. Then he decided to write a book about his ordeal, "The Rules of the Tunnel: My Brief Period of Madness."

Ned Zeman joins me now here in Los Angeles.

Welcome.

NED ZEMAN, CONTRIBUTING EDITOR, "VANITY FAIR": Thank you.

KURTZ: Let's start with your description of life at "Vanity Fair." "You'd spend an hour feigning interest in their latest piece of junk romantic comedy when you would interview a celebrity. You would spend 5,000 words trying to make the subject seem fun and lively, while simultaneously signaling to the reader your snarking contempt for the whole process."

ZEMAN: That's about it. Not every time, but I would say more often than not, yes.

KURTZ: When you covered celebrities and you would write about their drug problems and their mental problems and their always going into rehab, did it occur to you that you might wind up in a similar situation?

ZEMAN: Absolutely not. I think at that time, as a younger man, I thought that this was -- you know, there's a line separating us and them. And I thought that was all sort of just kind of entertainment. It never occurred to me in a million years.

KURTZ: When you wound up hospitalized for mental problems, what was the diagnosis?

ZEMAN: The diagnosis originally was depression, just classic depression like so many people have, but just to the nth degree.

KURTZ: So being out here in L.A. and interviewing these famous celebrities on "Vanity Fair," that caused you to get depressed?

ZEMAN: You know, you'd think if that's going to make you depressed -- and that's not the thing that made be depressed, but if you can be depressed in that circumstance, you must be pretty depressed.

KURTZ: As you went through your treatment, you were diagnosed as -- I mean, you knew yourself you were suffering from amnesia.

ZEMAN: I think it's shocking for anyone, but it's particularly shocking if you make your living as a reporter, because if anything is going to freak you out, it's not being able to remember what you did 15 minutes ago. And then you begin to think, you know, I'm never going to be able to make a living again and no one is ever going to trust me. And why would they? Because I don't remember anything.

KURTZ: So how do you write about this long and painful episode of your life while suffering from amnesia? ZEMAN: You have to pretty much wait until the -- there's short- term amnesia and there's long-term amnesia. And you wait until the short-term amnesia subsides, which I did. And then you basically have to look at yourself the way you would writing about someone else as a reporter.

KURTZ: You had to go out and investigate --

ZEMAN: Correct.

KURTZ: -- what you had done when you were in and out of the hospital, and you had to look at e-mails that you had sent and that you received from family and friends. I mean, that must have been a bizarre experience.

ZEMAN: It's extremely bizarre. And you have to basically go and interview everyone that was around you at the time -- you know, doctors, friends -- and try to be as objective as possible. And, you know, ask them to not only tell you the good stuff that happened, but to tell you the ugly stuff, which is what you would do as a reporter.

KURTZ: And then you wound up getting electroshock treatments for your difficulties.

ZEMAN: I did. Yes, that's what caused the amnesia.

KURTZ: That's what caused the amnesia.

ZEMAN: Yes.

KURTZ: Did it also contribute to your being able to regain a normal life?

ZEMAN: It didn't in my case. And I want to be careful about that, because I do believe in it as a treatment. But in my case, no, it just gave me amnesia.

KURTZ: OK.

The portrait that emerges of you in this book is not a pretty one. I mean, you were constantly lying to families -- to your family members, to friends, to girlfriends, to ex-girlfriends.

ZEMAN: Right.

KURTZ: And yet, you're laying it all out there. Why? Why tell people about what a scoundrel you were?

ZEMAN: Well, a couple reasons. I mean, one, I was somebody who, you know, put up a good front for a long time. And, you know, that's pretty hypocritical if you're going to be a reporter and you're going around asking people, tell me the truth, darn it, I want to know the truth.

And, you know, you're not doing it about yourself. So I felt it was important to do that for therapeutic reasons, but also to show basically -- send up a red flag to people going through what I went through.

Anybody, if you don't take care of yourself, can be pushed to this nth degree. And I became sort of a caricature version of myself and a monster version of myself. And it's good for me to know that, you know, and to be blunt about it, because I think people need to know what can happen if you done take care of yourself.

KURTZ: Was it painful for you as you kind of reconstructed this period of your life to have people who were close to you tell you that you acted like a snake, and then to broadcast this to the world, as we're doing right now?

ZEMAN: Yes, it was brutal. I mean, I knew there's kind of -- when you go through amnesia, you don't remember things, but you kind of remember things. In your heart you remember things.

So I knew it wasn't going to be good. But I was surprised. You know, I definitely put off some of the ugliest stuff until the very end, e-mails. I just didn't want to look at them. But by that time I was already committed. You have to go through with it.

KURTZ: Committed to the project.

ZEMAN: Committed to the book.

KURTZ: You were no longer committed to the hospital.

ZEMAN: Absolutely. I was down to the bitter end. There was a deadline, and I had to do it. And I just felt horrible writing some of the stuff I did, but I would have felt worse if I didn't.

KURTZ: Having been through this, having been in and out of the hospital, having been through electroshock, how have you managed to put your life back together? Do you feel the way you did before you had these mental problems?

ZEMAN: Yes. I feel better. Actually, much better.

This all happened about three years ago. And, you know, I went through -- I bottomed out. And after about six, nine months, it started -- everything started coming back.

You know, your memory does return. I have about a year and a half that will never come back, but it starts coming back, and I learned my lesson. And if nothing else, it's a slap in the face, and it tells you, don't make these mistakes again. So my memory is totally 100 percent back to normal.

KURTZ: And so now you're back to feigning interest in the lives of celebrities?

ZEMAN: Yes. I don't really write about celebrities so much anymore. I would every now and again, but not really.

KURTZ: OK. All right.

Ned Zeman, thanks very much. We're glad to see you all in one piece.

ZEMAN: Thank you very much.

KURTZ: It's a very -- it's a no-holds-barred book that really doesn't pull punches in describing what you went through.

Still to come on RELIABLE SOURCES, a laid-off "L.A. Times" columnist has some cunning words for the newspaper. And Arianna Huffington's Web site apologizes to a conservative activist.

The "Media Monitor," straight ahead.

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KURTZ: Time now for the "Media Monitor," our weekly look at the hits and errors in the news business.

The thing that media writers know all too well is the battered state of the newspaper business. Tim Rutten, who wrote a smart and sharp-edged media column for the "Los Angeles Times," has been let go after nearly 40 years at the paper, a victim of the latest round of layoffs. Rutten talked about his pink slip and how businessman Sam Zell drove the paper into bankruptcy after buying its parent firm, The Tribune Company.

In an interview with KPCC FM, Rutten said the "L.A. Times" is a shell of what it was 10 years ago.

(BEGIN AUDIO CLIP)

TIM RUTTEN, FMR. COLUMNIST, "L.A. TIMES": Whatever the merits of your work, to be older and to be collecting a relatively large paycheck was essentially to have a kind of target on your back. As somebody who spent their life there, it's been a disaster for this community.

"The Huffington Post" had to back down after getting into a scrap with conservative activist Andrew Breitbart. The Huff Post piece charged Breitbart with doctoring a clip showing CBS's new White House correspondent Nora O'Donnell saying this about the debt crisis --

Tough choices made by both sides in that potential agreement that was not reached, and

(BEGIN VIDEO CLIP)

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: Tough choices made by both sides in that potential agreement that was not reached, and we did not get that done.

N. O'DONNELL: That's (ph) OK. He gave them everything they wanted and we got nothing.

(END VIDEO CLIP)

KURTZ: Now, some people couldn't hear the first part of what O'Donnell said, but you have Democrats saying and thought O'Donnell was expressing her personal opinion about the situation. Well, Breitbart, who once helped Arianna Huffington launch her site, took to Twitter to call the doctoring charge a malicious lie, asking Arianna, "Want a war, Dolly?"

She didn't. Huff Post did the right thing by taking down the article and apologizing to Breitbart.

That mistake aside, "The Huffington Post" reached a milestone this week. Readers have posted 100 million comments on its stories. The way in which Arianna's site, now owned by AOL, has engaged people in a dialogue is one of the secrets of its success.

Now, it sounded like a tantalizing tech story. A Canadian research firm reported that people who use Microsoft's Internet Explorer Web browser are dumber -- that's right, dumber -- than other folks online. "The Atlantic," "Forbes," Yahoo!, CNN.com, "The Daily Mail," "The Telegraph" all went with it. But some further digging by the BBC reveals that the company, AptiQuant, doesn't exist. The whole thing was a hoax.

I mean, this sounds absurd, absurd enough to fully check it out before running with it.

Well, that's it for this special Los Angeles edition of RELIABLE SOURCES.

I'm Howard Kurtz.

We'll be back in Washington next Sunday morning, 11:00 a.m. Eastern, for another critical look at the media.